In case you haven't noticed, interest in cryptocurrency is booming. It went about as mainstream as mainstream gets with multiple ads during last Sunday's Super Bowl. (The Larry David spot for FTX is my favorite.) While tokens like Bitcoin and Ethereum have become household names, and make up the majority of the total market cap, there are literally thousands of cryptocurrency investments out there.
Even Bitcoin, which is trading at over $44,000, started out valued at pennies and it took almost three years for it to start trading over $1, which it reached in February 2011. Every great journey starts with small steps. While it's impossible to predict which tokens will have that type of long-term success, there are some crypto investments under $1 with great potential. One of them is Hedera (HBAR -3.10%). But can it reach $1?
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What is Hedera?
If you're not familiar with it, you're not alone, but it is a cryptocurrency worth getting to know. Hedera is an alternative to traditional blockchain networks with some unique advantages.
Hedera is a publicly distributed ledger that is built not with a chain of blocks, but rather with a hashgraph-distributed consensus algorithm developed by Hedera co-founder and chief scientist Leemon Baird. The hashgraph technology stores data in hashes within a graph as opposed to blocks. With hashgraph technology, every container (the infrastructure that holds applications) is incorporated into the ledger -- with none discarded. All the branches in the hashgraph continue to exist forever, woven into a single whole. It is designed so that the more transactions on the hashgraph, the faster the transactions are verified.
To do this it relies on a different verification method than the traditional proof-of-work blockchain used by Bitcoin and Ethereum. With this system, the community of nodes (computers that connect to the cryptocurrency) on the hashgraph come to consensus on both the validity and the timestamp of every transaction through gossip about gossip and virtual voting protocols. Gossip about gossip is a variation of the gossip protocol, which is a way of sharing information between nodes to validate and record the transaction.
It has a token, HBAR, which is used to conduct transactions on Hedera. It is not built upon Ethereum, as it has its own source code. In addition, it is governed by its own Hedera Governing Council, which consists of representatives from 39 global enterprises and organizations from 11 different industries. The council, whose members have term limits, makes key decisions over software upgrades, network pricing, and treasury management, among others.
Key differentiators
Hedera is built to process transactions at higher speeds and lower costs than its competitors. It can handle 10,000 transactions per second, which is far more than Bitcoin or Ethereum, and can confirm transactions in three to five seconds. It has an average transaction fee of $0.0001 and uses a minuscule amount of energy. Further, Hedera is validated as asynchronous Byzantine Fault Tolerant (ABFT), which is considered the highest level of security for distributed systems.
Obviously, the speed and security of the systems is a big advantage, but one differentiator that should not be overlooked is Hederaʻs energy efficiency. Crypto mining has come under scrutiny by federal lawmakers over it enormous energy usage and contribution to climate change. Through the hashgraph consensus model, Hedera avoids energy-intensive proof-of-work crypto-mining.
In a statement on Jan. 27, U.S. Senator Elizabeth Warren (D-MA) said, "The extraordinarily high energy usage and carbon emissions associated with Bitcoin mining could undermine our hard work to tackle the climate crisis -- not to mention the harmful impacts crypto-mining has on local environments and electricity prices. We need more information on the operations of these crypto-mining companies to understand the full scope of the consequences for our environment and local communities."
Hedera would be at a big advantage if federal lawmakers place energy use restrictions on crypto mining.
Hedera is trading right now at just $0.26 after reaching a high of $0.50 back in September 2021. It has a market cap of $4.7 billion, which makes it the 33th-largest cryptocurrency.
Will it hit $1 by the end of 2022? Given the uncertainty in the market right now, and the potential for regulations, it is hard to say when that plateau will be reached. But it is definitely one to keep an eye on because it has some key advantages that could serve it well in the long term as the market evolves.
